UNIVERSITA’ DI PADOVA

DIPARTAMENTO DI SCIENZE ECONOMICHE E AZIENDALI

MASTER IN COMMERCIO INTERNAZIONALE - MASCI
MASTER IN INTERNATIONAL COMMERCE- MASCI

Master’s Thesis

Ship Registration in Panama and Malta: A comparative Assessment

Supervisor:
Prof. Enrico Zamuner

Student:
Dott. Alexis Paniagua

Academic Year 2016-2017

TABLE OF CONTENTS

1. INTRODUCTION .............................................................................................................. 1

2. THE SHIP AND REGISTRATION SYSTEMS .......................................................................... 2

2.1. Definition of commercial ships............................................................................................ 2
2.2. Nationality of the ships ...................................................................................................... 2
2.3. Ship registration ................................................................................................................. 4
2.4. System of Ship Registries .................................................................................................... 8
2.4.1. Closed registration .............................................................................................................. 8
2.4.2. Open Registry ...................................................................................................................... 9
2.4.3. Semi open registry or Hybrid Registry............................................................................... 11
2.5. Advantages of the Open Registry ...................................................................................... 12
3. PROCESS OF REGISTRATION OF THE SHIPS ..................................................................... 14
3.1. Requirements and process for registration of the ships in Panama .................................... 14
3.2. Largest ownership of world fleet per country or territory .................................................. 18
3.3. Largest ship registries and their main differences .............................................................. 19
3.4. Panama versus other principal competitors with emphasis on Malta registry .................... 21
3.4.1. Panama Vs Liberia ............................................................................................................. 21
3.4.2. Panama vs Malta ............................................................................................................... 22
4. CONCLUSION ................................................................................................................. 27

5. BIBLIOGRAPHY .............................................................................................................. 31

I
1. INTRODUCTION

More than 80 percent of the world trade is moving today through the international shipping
industry. Without that activity it would be impossible to maintain the needs of the market. Within
all the means of international transport, the maritime transport is the one that moves the most
volume of products in the international trade and it is the most efficient way to travel or transport
with merchandise objects, reducing the cost of the freight. Maritime transport remains the main
point of international trade and globalization and it is of crucial importance to modern society.
According to the International Maritime Organization (IMO), there are currently more than 50,000
merchant ships, registered in more than 150 nations, manned by over a million seafarers of nearly
every nationality, carrying all kinds of cargo internationally under strict security, legal and
environmental protection measures. Taking into account the importance of maritime trade, we
cannot ignore the importance of understanding the various ship flag systems to understand the
larger picture of international trade.

Merchant ships, like individuals, have a nationality. The use of the flag is of relevant
importance, since it determines the nationality of each ship and it is a proof that it belongs to a
certain State. For this reason, the ships are considered as a part of the territory of a State, so it is
mandatory that they are in compliance with regulations, obligations and responsibilities such as
payment of taxes required by the law governing the use of the flag of the State in question or
fulfilling technical requirements of the flag state maritime administration. When vessels sail on the
high seas, which is a maritime space where no state or nation governs, the laws of the state of its
flag shall govern on board of the vessel.

The important issue is to know which are the most used state flags in the international
maritime trade, what are their main characteristics and differences between various ship flag
systems. Taking in consideration the advantages of open registries and the fact that most of the
international ships are registered in such registers, we have a focus in this work on a comparative
analysis between the two most used flags, which are Panama and Malta.

1
2. THE SHIP AND REGISTRATION SYSTEMS

2.1. Definition of commercial ships

A merchant ship or trading vessel is a boat or ship that transports cargo or

carries passengers for hire. This excludes pleasure craft that do not carry passengers for
hire; warships are also excluded.1

According to the Article 2 of the United Nations Convention for registration of Ships given
in Geneva on 7th of February 1986 admiralty law, a ship means any self-propelled sea-going vessel
used in international seaborne trade for the transport of goods, passengers, or both with the
exception of vessels of less than 500 gross registered tons. 2

In this category are also considered to be included the vessels of private owners as well as
those of companies, and even those of the State; provided that its object is to carry out commercial
or traffic operations or provide ancillary services to these operations.

2.2. Nationality of the ships

The maritime navigation is governed by the international character that it contains, taking
into account the need on the part of the ships to adopt a certain nationality.

For some authors, the nationality of the ship would not be a true nationality, but simply the
means of expressing the fact that a ship is registered in a particular country and that the State
exercises some vigilance over it.

1
https://en.wikipedia.org/wiki/Merchant_vessel
2
http://www.admiraltylawguide.com/conven/registration1986.html

2
 According to the most recent United Nations Convention on the Law of the Sea as from
1982, article 91 concerned to the nationality of ships refers to the nationality of the ship as follows:

 Every State shall fix the conditions for the grant of its nationality to ships, for the
registration of ships in its territory, and for the right to fly its flag. Ships have the
nationality of the State whose flag they are entitled to fly. There must exist a genuine
link between the State and the ship.
 Every State shall issue to ships to which it has granted the right to fly its flag
documents to that effect.3

A ship cannot have, in a strict or limited sense, more than one nationality which corresponds
to that of the State that granted the use of its flag, however there is a dual registration of the ships,
and it is given only when a ship under a Chartering Contract requests a different registration to the
one that owns, without the cancellation of the main registry. According to the article 92 of the
United Nations Convention on the Law of the Sea:

 Ships shall sail under the flag of one State only and, save in exceptional cases
expressly provided for in international treaties or in this Convention, shall be subject
to its exclusive jurisdiction on the high seas. A ship may not change its flag during
a voyage or while in a port of call, save in the case of a real transfer of ownership
or change of registry.
 A ship which sails under the flags of two or more States, using them according to
convenience, may not claim any of the nationalities in question with respect to any
other State, and may be assimilated to a ship without nationality. 4

3
http://www.un.org/depts/los/convention_agreements/texts/unclos/unclos_e.pdf
4
http://www.un.org/depts/los/convention_agreements/texts/unclos/unclos_e.pdf

3
 A cardinal principle in international law is that jurisdiction over a vessel on the high seas
resides solely with the state to which the vessel belongs. A second principle, which is corollary
to the first, is that all vessels using the high seas must possess a national character.

The concept of the flag in maritime law and practice is virtually synonymous with ship
registration. Indeed, the expressions “nationality”, “flag” and “registration” are often used
interchangeably.

However, they each have a distinct and essential significance as they all relate to the
identification and exercise of jurisdiction over ships. There are legal implications that need to be
appreciated in light of these distinctions; and furthermore, the interrelationship between a ship’s
nationality, registration and ownership needs to be clearly understood because these matters raise
some contentious issues and have in certain contexts evoked emotional and sensitive responses. 5

2.3. Ship registration

Ship registration is subject to the regulations that each Flag State establishes with the
purpose of flying its flag, since this is established by the Public International Law. It is important
to define definition of Flag State, which means a State whose flag a ship flies and is entitled to fly.6

Most important regulatory institution regulating international shipping is IMO. IMO is the
International Maritime Organization, which is a United Nations specialized agency with
responsibility for the safety and security of shipping and the prevention of marine pollution by
ships.7

5
http://www.admiraltylawguide.com/conven/registration1986.html
6
http://www.admiraltylawguide.com/conven/registration1986.html
7
http://www.imo.org/en/About/Pages/Default.aspx

4
 According to Article 5 (1) of the Geneva Convention on the High Seas of 1958, effected on
1962, it is required that the state must effectively exercise its jurisdiction and control in
administrative, technical and social matters over ships flying its flag. In 1986, the United Nations
Conference on Trade and Development attempted to solidify the genuine link concept in the United
Nations Convention on Conditions for Registration of Ships.

The Convention on Conditions for Registration of Ships would require that a flag state is
linked to its ships either by having an economic stake in the ownership of its ships or by providing
mariners to crew the ships.8

Taking into account everything that is mentioned in the previous paragraphs, it becomes
clear that any commercial activity of the ship begins with the registration of the ship since ships
traveling internationally are required to be registered.

Ship registration is the process by which a ship is documented and given the nationality of
the country to which the ship has been documented. The nationality allows a ship to travel
internationally as it is a proof of ownership of the vessel.9

In practice, flagging the ship in a registry is consisted of issuance of the Certificate of

Registry, called also Navigation Patent, and issuance of the Radio license to the ship.

Certificate of registry has all the relevant data of the ship recorded, such as: name of the
ship, previous name, IMO unique number designated to the vessel, name of the ship registered
owner, ship type, dimensions such as gross and net tonnage of the vessel, length, breadth and depth,
type and number of engines, manufacturers brand and name and place and date of construction.

8
https://en.wikipedia.org/wiki/Ship_registration
9
https://en.wikipedia.org/wiki/Ship_registration

5
 Radio license contains detailed data of the radio equipment the vessel has on board such as
quantity, type, model, frequency range, emission and MMSI number. Important data on the radio
license is call letter. By call letter which is assigned to the ship by the administration it is possible
to track the ship through the registries even if the ship changes the owner and the flag.

It is more confident when searching for the history of the ship than IMO number. IMO
number the vessel shall never change as it is her identification number which remains linked to the
hull for its lifetime, regardless of a change of name, flag or owner.

It is also important to highlight another important document issued by the flag

administration to the ship called Continuous Synopsis Record (CSR) where all the relevant data of
the ship and its history as from the first registration up to date are recorded.

Continuous synopsis record is a special measure under Safety of life at sea (SOLAS) for
enhancing the maritime security at the sea. According to SOLAS chapter I, all passenger and cargo
ships of 500 gross-tonnage and above must have a continuous synopsis record on board.10

Data inserted on the CSR are similar to the data recorded on the Patent with the difference
that on this document we have registered data of the classification society of the ship, operator of
the ship with its due number assigned by the IMO, called IMO Company identification number.

IMO Company number particularly is of crucial importance to understand who is really

responsible for the management of the ship before the administration and consequently before the
international maritime institutions in charge of the fulfilment of the provisions of the international
conventions set up by the IMO whose concerns are safety and security of shipping, personnel on
board and prevention of marine pollution.

10
https://www.marineinsight.com/maritime-law/what-is-continuous-synopsis-record-csr-of-ships/

6
 CSR also contains data of two important documents issued to the ship which are Safety
Management Certificate (SMC) and International Ship Security Certificate (ISSC).

According to the data inserted on the same certificate issued by ships class, SMC certifies
that Safety Management System for the ship has been audited and that it complies with the
requirements of the International Management Code for the Safety Operation of Ships and for
Pollution Prevention (ISM Code).

Using the same source of information on the certificate issued by ships class, International
Ship Security Certificate (ISSC) certifies that the security system and any associated security
equipment of the ship has been verified and that in all aspects satisfactory comply with the
International Code for the of Ships and of Port Facilities (ISPS Code).

It is very important when transporting the merchandise through the maritime trade to take
into account two crucial factors: the validity of SMC and ISSC certificates of the ship, and to verify
the Port State Control (PSC) reports of the ship.

PSC verification will depend on the commercial route of the merchandise. There are two
probably most revised PSCs: Paris MOU and Tokyo MOU.

The Tokyo MOU is one of the most active regional port State control (PSC) organizations
in the world. The organization consists of 20 member Authorities in the Asia-Pacific region. The
main objective of the Tokyo MOU is to establish an effective port State control regime in the Asia-
Pacific region through co-operation of its members and harmonization of their activities, to
eliminate substandard shipping so as to promote maritime safety, to protect the marine environment
and to safeguard working and living conditions on board ships.11

11
http://www.tokyo-mou.org

7
 The Paris MOU has the same purpose for the area of Europe. Paris MOU is the
organization consisting of 27 participating maritime Administrations and covering the waters of
the European coastal States and the North Atlantic basin from North America to Europe.

The current member States of the Paris MoU are: Belgium, Bulgaria, Canada, Croatia,
Cyprus, Denmark, Estonia, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Latvia,
Lithuania, Malta, the Netherlands, Norway, Poland, Portugal, Romania, the Russian Federation,
Slovenia, Spain, Sweden and the United Kingdom.12

This two databases contain data of the vessel updated detailing validity of all statutory
certificates of the ship, inspections performed on board, results of deficiencies found and possible
detentions which will certainly give us valuable information when choosing the ship to transport
the goods.

2.4. System of Ship Registries

For the past couple of decades, records have been classified into closed, open and semi-
open systems. In the present work, we will analyse the particularities of the closed and open
register, and just mention a semi-open system.

2.4.1. Closed registration

The main purpose of this type of registration is to safeguard the image of the naval
institution through a genuine and effective link between the ship and the State.

12
https://www.parismou.org/about-us/organisation

8
 In this type of registry it is restricted for the number of ships to be under its jurisdiction due
to the rigidity to grant the registration as that type of registry is open only to ships of its own nation,
meaning that the ships are owned by companies or persons that are residents of that country and
whose principal place of business is in the country of registration.

Closed registers were traditionally national, such as Greece, the United Kingdom and the
Scandinavian countries, where only the nationals of those countries can register the vessel.
However, the exodus of ship-owners and ships during the 1980s left traditionally maritime
countries with depleted fleets.

Among the characteristics we can mention, some of them are that high percentage of
workers or sailors are nationals of the State granting their enrolment, that the vessel belongs to
natural or legal persons of the granting State, that a more effective system of control over the naval
fleet must be established to guarantee compliance with the audits and provisions governing the
matter, that the funds used for the construction or acquisition come totally or partially from the
national interests of the country in which the vessel is registered.

Ship has to be used preferably on routes that serve the foreign trade of the country of
registration. In a closed registry, the tax is charged on the earnings as compared to open, wherein
the taxes are on the basis of tonnage.

2.4.2. Open Registry

In order to circumvent some legal provisions, mainly on taxes, and on labour problems
arising from the demands of the trade unions, some ship-owners went to small countries to register
their ships, which is how open registrations arise.

9
 The modern practice of flagging ships in foreign countries began in the 1920’s in the United
States when ship-owners, frustrated by increased regulations and rising labour costs, began to
register their ships to Panama.13

This type of registration turns out to be the contraposition of the closed registries. The open
registers are distinguished by welcoming any vessel that complies with the requirements which are
needed for the ship registration, irrespective of the nationality of the owner of the ship and there is
no greater involvement of the State in the activities of the vessel.

These registrations have also been referred as flag of convenience, for the simple reason
that the facilities they provide are larger compared to closed record systems, hence most of the
maritime trade is inclined to use this kind of registration. Once entered in the registry a ship is
required to fly the flag of the country and is entitled to the privileges and protection of that
particular country.

Mentioned benefits of the open registry may lead in its part to the negative side in the sense
that in the registry can enter a number of ships which are substandard ships. This may especially
happen in the open registries where no restriction on age of vessel is applied. It is important to
emphasize that more than half of the world’s shipping countries follow open registries, such as the
registries of Panama, Liberia, Marshal Islands, Malta, Bahamas etc.

More precisely, according to United Nations Conference on Trade and Development

(UNCTAD) and its data published for Review of Maritime Transport for the year 2016, the tonnage
registered under a foreign flag, meaning by that as mentioned before when the flag own by a vessel
differs from the nationality of an owner, as per the same source is 70.2 per cent of the world total.
14

13
https://en.wikipedia.org/wiki/Flag_of_convenience
14
http://unctad.org/en/PublicationsLibrary/rmt2016_en.pdf

10
 For example, under the flags of Liberia, the Marshall Islands or Panama, an owner from
Germany or Japan can employ third-country seafarers, for example from Indonesia or the
Philippines, who work for lower wages than their German or Japanese colleagues.

As from data of 1st January 2016 published in the UNCTAD, Panama, Liberia and the
Marshall Islands continued to be the largest vessel registries, together accounting for 41.0 percent
of world tonnage, with the Marshall Islands recording the highest growth among major registries,
at 12 per cent over 2015. The top 10 registries account for 76.8 per cent of the world fleet in terms
of Dead Weight Tonnage (DWT). 15

2.4.3. Semi open registry or Hybrid Registry

Hybrid registers offer attractive combinations of national and open registry features
designed to attract ship-owners and have been developed in response to open registries.

They are a lot easier to access and have fewer entry requirements than
most national registries. They tend to maintain a nationality link between beneficial owner or
management of the vessel and the flag State. In general, hybrid registries tend to offer financial
incentives and advantages similar to open registers.16

Many hybrid registers are maintained for use only by national ship-owners as an alternative
to flagging out and as a way to compete with the open registry system.

15
http://unctad.org/en/PublicationsLibrary/rmt2016_en.pdf
16
https://basic2tech.wordpress.com/2016/02/18/types-of-ship-registries/

11
 2.5. Advantages of the Open Registry

In this paragraph, the most important features of the open registry system shall be outlined,
as well as the main advantages and attractions that an open registry provides.

To give a better explanation of the attractions of open registry we have taken the Panama
registry as an example because Panama is one of the countries with the oldest and largest open
registry and it gathers all the aspects and conditions that it requires.

The main attractions presented by the Panamanian open registry of ships are the following:

 No restrictions are imposed on the nationality of the owner, any person or company,
regardless of nationality and place of corporation, which is eligible to register ships
under the Panamanian flag
 International trade without taxation as its only territorial and will not tax the income of
ships involved in international navigation or trade. However, the legal representation of
a lawyer within the territory is required to comply with the requirements of the United
Nations Conference on Trade and Development (UNCTAD) and the link with the
National State
 There is no limitation on the age of the ships for their registration, nor is an inspection
required before the flag
 There is no minimum tonnage required for the registration of a vessel in Panama
 Lower costs for a ship registration in comparison with the other jurisdictions
 Dual registry of ships, which means that vessels registered under the Panama flag but
under charter to a company incorporated in other country, may also be simultaneously
registered in that country. This ship register method will allow a foreign ship that has a
previous registration of two years in a foreign country to register in the Panama ship
register at the same time without a cancellation of the registration of the previous
country.

12
  Advantage of Technical Certificates, by which the ship owners who wish to transfer
their ships to the Panamanian flag will not be required to have them re-surveyed if the
ships possess valid safety and tonnage certificates at the moment of registration,
removing the necessity to have the ship dry docked prior to registration and
consequently saves the ship owner considerable expenses
 No restrictions on the nationality of the master, officers and crew
 Vessels under construction may also apply for the provisional registration and radio call
letters 17

17
http://www.pmacertification.com/view.asp?idp=7&c=12

13
3. PROCESS OF REGISTRATION OF THE SHIPS

As previously mentioned, registration of the ship or flagging of the ship means principally
issuance of the Certificate of Registry and issuance of the Radio license to the ship. Process of ship
registration begins with compilation of ships and owners data.

According to the article 11 of the United Nations Convention on Conditions for Registration
of Ships, a State of registration shall establish a register of ships flying its flag, which register shall
be maintained in a manner determined by that State and in conformity with the relevant provisions
of this Convention. Ships entitled by the laws and regulations of a State to fly its flag shall be
entered in this register in the name of the owner or owners or, where national laws and regulations
so provide, the bareboat charterer.18

3.1. Requirements and process for registration of the ships in

Panama

Registration of the ship in Panama registry consists of provisional registration and

permanent registration. Provisional registration takes few days once all requirements are submitted.
Once the provisional registration is obtained, the interested party has up to 6 months to present the
documents and requirements for obtaining the permanent registration of the vessels.

18
http://www.admiraltylawguide.com/conven/registration1986.html

14
 Herein in below we are detailing the documentary requirements in order to register the ship
in Panama:

 Copy of the Power of Attorney granted by owners in favour of assigned lawyers in

order to register the vessel, duly notarized and apostilled or authenticated by a
Panamanian Consulate. It is important to mention that the process of registration of
the ship must be carried out by Panama lawyer.
 Prima Facie evidence ownership or of the intention to acquire ownership of the
vessel; Ownership Title registered in the previous registry and Deletion certificate
from the previous registry.
 Evidence of payment of applicable taxes and fees.
 Copy of the current Safety Management certificate (SMC) and Documents of
Compliance (DOC).
 Copy of the good standing of the ownership company
 Copy of the current Minimum Safe Manning Certificate (MSMC)
 Copy of the current International Tonnage certificate (ITC)
 Copy of the last Continuous Synopsis record (CSR)19

Upon successful completion with these requirements, a Provisional Statutory Certificate of

Registry and Provisional Radio Station Statutory License should be issued with a validity of six
(6) months. The vessels will have this period to fulfil the requirements for obtaining both the
permanent Statutory Certificate of Registry and the permanent Radio Station Statutory License.

19
http://www.pmacertification.com/view.asp?idp=25&c=15

15
 The following documents must be presented to The General Directorate of Merchant
Marine of The Panama Maritime Authority in order to obtain full term documents:

 Original Power of Attorney granted by owners to the assigned lawyers in order to

register the vessel, duly notarized and apostilled or authenticated by a Panamanian
Consulate.
 Prima Facie evidence ownership or of the intention to acquire ownership of the vessel;
Deletion certificate from the previous registry.
 Bill of Sale (BOS) and Acceptance of Sale (AOS). Forms in English and Spanish
language to be fill out and signed by the vendors (Bill of Sale) and by the purchaser
(Acceptance of Sale). As per Panama regulations BOS must be notarized authenticating
the signature, capacity to sign on behalf of the company as well as statement that the
vessel was a property of the vendors prior to the sale and that the vessel is free from
encumbrances. One original must be sent to Panama to be presented to the Panama
Maritime Authority.
 Evidence of ownership of the vessel in the form of the original Bill of Sale or Court-
ordered Public Auction. In the case of a new construction, the original Builder’s
Certificate must be presented.
 Certificate of incorporation of the Panamanian company under which the vessels will
be registered, if applicable. This certificate must be issued by the Public Registry of
Panama; if the owning company is Panamanian.
 Deletion certificate proving that the vessel has cancelled its former registry and has the
consent of the country of former registration to transfer registry to Panama; duly
notarized and apostilled and authenticated by apostille.
 Filled radio application form 20

20
http://www.pmacertification.com/view.asp?idp=25&c=15

16
Technical Requirements for registration of the ship permanently are:

 Copy of the International Tonnage Certificate (ITC); issued by the Panama authorized RO.
 Continued Synopsis Record Certificate (CSR); issued by the Panama authorized RO.
 Copy of Safety Management Certificate (SMC); issued by the Panama authorized RO.
 Copy of Document of Compliance with ISM Code (DOC) by the managing company issued
by the Panama authorized RO.
 Copy of the International Ship Security Certificate (ISSC); issued by the Panama
authorized RO.21

According to the type of ship there are additional requirements for oil tankers, such as copy
of International Oil Pollution Prevention Certificate; for fishing vessels a Fishing License issued
by the Aquatic Resources Authority of Panama (ARAP).

Upon successful fulfilment of requirements and provisions, the Directorate General of

Merchant Marine will issue the permanent Statutory Certificate of Registry and permanent radio
station statutory license with a validity not exceeding five (5) years.

21
http://www.pmacertification.com/view.asp?idp=25&c=15

17
 3.2. Largest ownership of world fleet per country or territory

It is important to emphasize that more than half of the worlds shipping countries follow
open registry and that the tonnage registered under a foreign flag is 70.2 per cent of the world total.
According to United Nations Conference on Trade and Development (UNCTAD) and its data
published for Review of Maritime Transport for the year 2016, from January 2016, the top five
ship owning economies in terms of dead weight, which is a maximum ship carrying capacity, were
Greece, Japan, China, Germany and Singapore, while the top five economies by flag of registration
were Panama, Liberia, the Marshall Islands, Hong Kong (China) and Singapore.

In respect of shipbuilding the largest countries are China, Japan and the Republic of Korea,
accounting for 91.4 per cent of gross tonnage worldwide constructed in 2016. From UNCTAD
data we have taken information of 11 principal countries comparing the total number of ships and
their division in terms of registration in the number of national flag and foreign flag:

 Greece has the largest number of ship owners with a total of 4,136 ships of which 3,408 are
foreign flags and 728 national flags, followed by,
 Japan with a total of 3,969 ships of which 3,134 are foreign flags and 835 national flags.
 China with a total of 4,960 ships of which 1,915 are foreign flags and 3045 national flags.
 Germany with a total of 3,361 ships of which 3,121 are foreign flags and 240 national flags.
 Singapore with a total of 2553 of which 1054 are foreign flags and 1499 national flags.
 Hong Kong (China) with a total of 1448 of which 594 are foreign flags and 854 national
flags.
 Republic of Korea - total of 1,634 of which 839 are foreign flags and 795 national flags.
 United States with a total of 1,995 of which 1,213 are foreign flags and 782 national flags.
 United Kingdom with a total of 1,329 of which 997 are foreign flags and 332 national flags.
 Norway with a total of 1,854 of which 996 are foreign flags and 858 national flags.
 Russian Federation with a total of 1,680 of which 335 are foreign flags and 1325 national
flags.22

22
http://unctad.org/en/PublicationsLibrary/rmt2016_en.pdf

18
 3.3. Largest ship registries and their main differences

According to the UNCTAD data as from 1st January 2016, Panama, Liberia and the
Marshall Islands together account for 41.0 per cent of world tonnage, while The Marshall Islands
has recorded the highest growth among major registries, at 12 per cent over 2015.

UNCTAD data from 2016 reveal the following relevant information in respect of the largest
registries. From this data, we have taken information of eight principal registries comparing the
total number of ships, their division in terms of world total percentage, cumulated share of dead
weight, average vessel size by death weight tones and dead-weight tonnage growth in percentage
presented here in below.23

 Panama: Total number of vessels 8,153 representing vessel share of word Total of
8.97%, cumulated share of dead weight tonnage % of 18.51, average vessel size by
death weight tons of 64,896.88 and growth in percentage for dead-weight tonnage for
the 2015-2016 of -0.53%.

 Liberia: Total number of vessels 3,185 representing vessel share of word Total of 11.42
%, cumulated share of dead weight tonnage % of 29.93, average vessel size by death
weight tons of 68,073.98 and growth in percentage for dead-weight tonnage for the
2015-2016 of 2,21%.

 Marshal Islands: Total number of vessels 2942 representing vessel share of word Total
of 2.77 %, Cumulated share of dead weight tonnage % of 49,96, average vessel size by
death weight tons of 65,553.85 and growth in percentage for dead-weight tonnage for
the 2015-2016 of 7.63%.

23
http://unctad.org/en/PublicationsLibrary/rmt2016_en.pdf

19
 Hong Kong: (China) Total number of vessels 2515 representing vessel share of word
Total of 11.07, cumulated share of dead weight tonnage % of 41.00, average vessel size
by death weight tons of 42,728.99 and growth in percentage for dead-weight tonnage
for the 2015-2016 of 12.03%.

 Singapore: Total number of vessels 3605 representing vessel share of word Total of
3.97, cumulated share of dead weight tonnage % of 57.00, average vessel size by death
weight tons of 37,028.53 and growth in percentage for dead-weight tonnage for the
2015-2016 of 7.50%.

 Malta: Total number of vessels 2,101 with vessel share of word Total of 5.26,
Cumulated share of dead weight tonnage % of 62.26, average vessel size by death
weight tons of 45,867.66 and growth in percentage for dead-weight tonnage for the
2015-2016 of 8.90 %.

 Bahamas: Total number of vessels 1450 representing vessel share of word Total of
1.59%, cumulated share of dead weight tonnage % of 66,66, average vessel size by
death weight tons of 55,545.18 and growth in percentage for dead-weight tonnage for
the 2015-2016 of 7.61%.

 Cyprus: Total number of vessels 1,053 with vessel share of word Total of 1.16%,
Cumulated share of dead weight tonnage % of 76.77, average vessel size by death
weight tons of 32,405.97 and growth in percentage for dead-weight tonnage for the
2015-2016 of 0.46%.

20
 3.4. Panama versus other principal competitors with emphasis on
Malta registry

3.4.1. Panama Vs Liberia

A comparative study between Liberian registry and Panamanian registry is made taking in
consideration that Liberia is the second largest registry after Panama. Before starting a comparative
study of the flag registration costs between Liberia and Panama, it is important to mention that
Liberia does not manage the registry of ships properly, but that it is privatized. There is a 10-year
agreement.

The ship registration offices are located in the United States and all the shares of the
company that manages it are owned by a dozen of North American investors. Liberia does not have
shares or part in that company, although a group of Liberian citizens are working in the offices of
Virginia and New York.

Liberia's maritime program represents forty percent of the country's total income to the
National Treasury. The cost of flagging in Liberia is unique, without taking into consideration the
tonnage of the ship, that is, regardless of whether the ship has 500 tons or 3,000 or 60,000, it will
be paid US $ 2,500.00.

On the other hand, in Panama to flag a boat of more than fifty thousand tons it costs US $
6,500.00 or US $ 7,000.00 if it is done through Panama or a Consulate besides various expenses
such as seafarers’ license fees and official licenses, translations, technical certificates, legal
representatives and others.

As for the annual taxes of a ship, Liberia today guarantees that it will not raise its taxes for
five years, however Panama offers a tax guarantee of twenty years from the day of the flag.

21
 3.4.2. Panama vs Malta

Ships intending to fly the Maltese flag must be registered with the Registry in the Merchant
Shipping Directorate of the Transport Malta.

The process of registration in Malta is quite similar to the registration of the ships in
Panama. The process is straightforward and takes few days for provisional registration.

Registration takes place in two stages. The vessel is first ‘provisionally’ registered for six
months (extendible for a further period or periods not exceeding in aggregate six months) and upon
satisfaction of certain requirements it is registered ‘permanently’. 24

The first step in which Panama correlates is to choose compulsory a law firm or a lawyer
licensed in Malta which will be responsible to the administration for the representation of the ship.

Application for Registration have to be presented to legal representative and then technical
data of the ship have to be sent from the current ship classification society directly to the e-mail
of the flag administration, Merchant Marine Directorate of Malta Transport, informing the
following: current name and Class ID No., IMO Number; the Class Notation as held by the
vessel; the validity dates of all the statutory certificates, specification of any exemptions or
conditions or recommendations issued to the vessel both in terms of her class and in terms of
international conventions.

Second step similar to registration in Panama is to verify availability of the vessel name at
the Maltese Registry and possible reservation of the name. Prior to the registration of the vessel
and as soon as the vessel name is reserved an application with the Register of Maltese Ships for
the assignment of the Maltese radio Call Sign and MMSI must be submitted.

24
http://www.transport.gov.mt/ship-registration/ship-registration

22
 A copy of the vessel's current International Tonnage Certificate is required to be sent
together with the application for vessel’s registration in Malta.

Furthermore, the interested party is required to send a scan copy by email of the Bill of Sale
from the sellers of the vessel to the buyers, a copy of the vessel’s transcript from the previous
register and a cancellation of registry certificate from the last country of registry, showing that the
vessel is free from encumbrances or any other maritime liens. In case of new building Builders
certificate must be presented.

Therein after, Malta transport will require to receive filled applications of the Minimum
Safe Manning certificate (MSMC) and of the Document of Compliance (DOC) from the technical
managers.

The technical managers or so called operators of the vessel appointed by the buyers should
be in possession of a valid DOC (unexpired) issued for the required vessel type in terms of the ISM
Code, under the authority of the Malta Administration.

All types of vessels, including also vessels under construction may be registered under the
Malta flag provided that they are in whole owned by legally constituted corporate bodies or entities,
either under or subject to the laws of Malta or foreign registered, or by citizens of Malta and other
European Union nationals and in Class and have valid statutory certificates.

The formation of a Maltese company can be arranged in a few days provided all required
documents are received and in good order. There are no nationality requirements to both directors
and shareholders. Maltese companies owning a vessel under the Malta flag are subject to be
licensed as shipping organizations in a special register held at the Registry and are required to
prepare an audited financial statement and file income tax returns on an annual basis. For this
purpose an authorised Malta auditor must be engaged. It is impotant to mention that Panama
shipping companies owning a vessel under the Panama flag engaged in international waters do not
23
require to present to Panama authorities an audited financial statement and to file income tax
returns.

Should a ship owner wish to opt for international ownership of a Malta-flagged vessel, it is
necessary for him to first appoint in writing and have a validly appointed resident agent, who is
habitually resident in Malta, at all times.

The owner of the vessel is required to submit an annual tax return at the end of the fiscal
year. However, commercial shipping activities that operate outside the island are exempt from
taxes.

Malta requires immediate inspections of vessels older than 15 years or at least within the
first 30 days. In the case of ships of 20 to 25 years, a prior inspection is needed. Each inspection
has a value of $ 2,500 plus transportation and per diem expenses. This registry does not accept
ships older than 25 years. Panama registry has no limitation on the age of the ships for their
registration, however all vessels are in subject to annual inspection by the duly authorized and
appointed flag inspector within the first year of their operations.

Another difference between the registry of Malta and the Panamanian registry is that the
Maltese registry office only operates from the island, but it has a telephone number for emergencies
at any time, including non-working days. Apart from the office in the city of Panama that provides
24-hour services, Panama has merchant shipping consulates in all countries that have major ports,
thus giving a more personalized and reliable service to customers.

Malta requires that ships which are to be registered, possess valid class certificate which is
unnecessary requirement in Panama, except the Safety Management Certificate which must be
valid.

Other important difference between these two registries is that Panama allows to be carried
out surveys and certification of the ships through the national classification societies recognized

24
organization authorized by the Panama Maritime Authority while Malta only allows the
certification of the ships through the IACS members of classification societies.
IACS as per its syllabus “International Association of Classification Societies” is a non-
profit membership organization of classification societies that establish minimum technical
standards and requirements that address maritime safety and environmental protection and ensures
their application.25

In terms of costs, Malta is based on the tonnage and age of the ships while in Panama the
cost is based on the gross registered tonnage, net registered tonnage and type of vessel.

Any interested client must bear in mind that there are additional costs which include a part
of the annual taxes to be settled in the registry of Malta on a yearly basis which consist of the cost
of incorporating a Maltese company which is about 1,500.00 EUR and of fees to be paid to the
resident agent, approximately depending on a law firm, of 1,800.00 EUR. This amount is
significantly higher than the resident fees charged yearly by the Panamanian lawyer firms.

In the competition to achieve the highest percentage of registrations, the EU has launched
a series of measures which provide the advantages to the ships registered under EU flag, among
which the registers of Malta and the register of Cyprus are the most used.

Within the most important benefits ships have under the EU flags we may mention the
following:

 No trading restrictions imposed on Maltese registered vessels within EU ports

which means that there is no cabotage. Cabotage is the carriage of cargo between

25
http://www.iacs.org.uk/about/

25
 two points within a country by a vessel or vehicle registered in another country.
Permission to engage in cabotage is, in general, strictly restricted in every country.
The term coastal trade or coastal trading is more and more preferred to the term
cabotage. 26

 Other benefit is that no piloting is required in many EU ports which significantly

reduces the costs of the operation of the vessels. A maritime pilot, also known as
a marine pilot, harbour pilot or bar pilot and sometimes simply called a pilot, is
a sailor who manoeuvres ships through dangerous or congested waters, such
as harbours or river mouths. He or she is normally an ex ship captain and a highly
experienced ship handler who possesses detailed knowledge of the particular
waterway, e.g. actual depth, direction and strength of the wind, current and tide at
any time of the day. The pilot is a navigational expert for the port of call.27

26
http://www.businessdictionary.com/definition/cabotage.html
27
https://en.wikipedia.org/wiki/Maritime_pilot

26
4. CONCLUSION

There is a lot of factors because of which the majority of ship owners prefer open registries
for registration of their ships rather than choosing closed registries.

Within the most important advantages, the following ones are the most common and of
highest importance:

1) The bureaucratic registration procedure is very simple and fast, allowing in most cases
registration to be carried out through the consulates, without having to travel to the country

2) The real owner of the ship may remain anonymous using the name of the off-shore
registered company as registered owner of the ship and this practice has its methods which
allow to hide the real owner

3) A very small or practically non-existent tax burden with respect to the benefits of the vessel,
which are usually subject to the registration fees and annual maintenance fees such as
resident agent fees and company annual taxes to be paid to the government

4) There is greater freedom of choice of the crew, since in many countries with closed
registries and maritime tradition national crew percentages are obligated and required

In respect of comparative study between Panama and Malta registry it can be highlight that
there are a few factors which are common for both registers. Like most open registries, Malta and
Panama offer advantages, incentives and tax exemptions for commercial and maritime activities of
ship owners.

27
 Special advantages are that their maritime laws are based on English law, both registries
have long tradition and good reputation within the maritime community and these two registries
are within the IMO white flags, which distinguishes the nations that have displayed and established
a plan of full compliance with the STCW-95 Convention and Code, also having a special advantage
in terms of inspections of the port state controls (PSCs), since being members of the white list
makes inspectors of the PSCs in practice being less strict in their inspections. It is important to
mention that ships are easily eligible to PSC controls in every port they enter.

As a main comparative advantage to attract clients to the registry of Panama we can

underline that Panama has no limitation on the age of the ships for their registration, nor is an
inspection required before the flag. This benefits are especially interesting for such ship owners
and ship managers who operate ships older than 20 or 25 years.

The registry of Panama in this way is monopolising a significant market in number of ships
but the registry must ensure that this policy does not collapse the image of the registry by making
all the preventives prior to the entry of the ship into the registry to ensure that sub-standard ships
are not registered. In order to achieve it, recommendation would be to verify the record of the ship
by the flag administration department in charge of maritime navigation and safety before the ship
is entered into the registry and the ship should be inspected by the flag inspector thoroughly to
determine if the ship complies with all international and national maritime safety standards before
issuing the permanent Navigational Certificate of Registry.

Another difference between the registry of Malta and the Panama registry is that the Maltese
registry office only operates from the island, but it has a telephone number for emergencies at any
time, including non-working days. Apart from the office in the city of Panama that provides 24-
hour services, Panama has merchant shipping consulates in all countries that have major ports, thus
giving a more personalized and reliable service to customers.

28
 As a main comparative advantage to attract clients to the registry of Malta we may mention
the benefit of unrestricted trade within the EU ports. Trade by ship conducted exclusively from
port to port of a single nation is usually regulated by the national law of the host nation and thus of
great importance to maritime law. Malta, which joined together with Cyprus to the European Union
in 2004, and in 2008 in the Eurozone, makes these flags within the EU attractive to ship owners
whose ships are trading within the EU waters.

Although open registry is more attractive to ship owners and ship managers, mainly due to
the tax exemptions on incomes for the vessels which operate outside of national waters, lower
annual taxes to be paid to the flag administrations and lower operational cost, there may be
disadvantages for the ship owners, registries and class societies because there may be more sub-
standard vessels which at the end are inspected by the port state control and resulting with a lot of
deficiencies to be rectified at a certain period of time or even detained at the port until the
deficiencies are rectified.

Detention of the commercial ships by the port state controls will obviously affect the
delivery of the cargo that is loaded on board the ship since it must be delivered according to the
contract of sale within the designated period of time.

Special attention is to be be put by the open registries on the policies related to the age of
the vessels. The Panama Maritime Authority shall pay special attention when registering ships
older than 20 years. Healthy recommendations would be to verify the status of each ship before it
enters the registry and according to these results make the decisions if the ship requires the pre-
inspection by the flag or the flag inspection of the ship can be made during the first 6 months. In
each case, it has to be done before the ship is accepted to the permanent registry.

This measure is not currently in practice in the Panama registry but it would be highly
advisable to do so with the purpose of preventing registration of ships which can be classified as
sub-standard and will only lead to the problems at long terms.

29
 The registry of Panama is in this way monopolizing a significant market in the number of
ships. The registry must ensure that this policy does not collapse the image of the registry by
making all the preventives prior to the entry of the ship into the registry. The record of the ship
must be reviewed by the department of maritime protection and the ship must be inspected by the
flag inspector thoroughly to determine if the ship complies with all international and national
maritime safety standards. After that, the Panama registry will issue the permanent Patent.

Special attention should be also given by the open registries to the proper and strict control
of the recognized organization (ROs) and recognized security organizations (RSO) authorized by
the flag administration to certify the ships, so that the level of quality of the registry remains high
and the registry does not lose its reputation.

Another factor that is very important to take into account and which turns out to be in order
at international level is related to the certification of the seafarers as there is a lot of evidence that
some administrations certify marine officers and issue their certificate of competence in a
suspicious manner and with irregular practices.

Administrations must apply in full sense with the international regulations of the STCW
Code, also known as the International Convention on Standards of Training, Certification and
Watch keeping for Seafarers, assuring that the most valuable asset of the company is able to operate
ships internationally in a safe and professional manner.

30
5. BIBLIOGRAPHY

1. http://unctad.org/en/PublicationsLibrary/rmt2016_en.pdf

2. http://www.admiraltylawguide.com/conven/registration1986.html

3. http://www.businessdictionary.com/definition/cabotage.html

4. http://www.duhaime.org/LegalDictionary/C/Cabotage.aspx

5. http://www.iacs.org.uk/about/

6. http://www.imo.org/en/About/Pages/Default.aspx

7. http://www.pmacertification.com/view.asp?idp=25&c=15

8. http://www.pmacertification.com/view.asp?idp=7&c=12

9. http://www.tokyo-mou.org

10. http://www.transport.gov.mt/ship-registration/ship-registration

11. http://www.un.org/depts/los/convention_agreements/texts/unclos/unclos_e.pdf

12. https://basic2tech.wordpress.com/2016/02/18/types-of-ship-registries/

13. https://en.wikipedia.org/wiki/Flag_of_convenience

14. https://en.wikipedia.org/wiki/Merchant_vessel

15. https://en.wikipedia.org/wiki/Ship_registration

16. https://www.marineinsight.com/maritime-law/what-is-continuous-synopsis-

record-csr-of-ships/

17. https://www.parismou.org/about-us/organisation

18. http://www.imo.org/en/OurWork/humanelement/trainingcertification/pages/stcw-

convention.aspx

19. http://www.stcwonline.com/stcw/stcw-the-white-list

31